A Tribute to the Thoughts of Another and his Friend"Everyone knows where we have been. Let's see where we are going!" -Another

Sunday, November 8, 2009

The New Global Reserve

Someone once asked me if all of our thoughts were on the level? Well, at a young age I often thought there was a difference between fact and opinion; then I learned that everything spoken was opinion and anything written was fact! A few years later, someone told me that anything spoken is not true and anything written is opinion! Last year I was told that everything is an opinion and nothing is true! Ha! Ha! So, today, I state for the record that all of our Thoughts are Absolute fact! (smile) -- FOA (08/06/01)

You know, I am not making this stuff up. What I write on this blog comes from journey, discovery and understanding of a train of thought that was many decades in the making. A thought process that began in the 1960's, around the time that Charles de Gaulle, president of the French Republic, began to seriously question the sustainability of the Bretton Woods system.

The process of journey, discovery and understanding of the transition we face today, on a collective scale, has taken just as long as the unfolding of time itself. Isn't this a curious thought?

Please join me on the Gold Trail and discover with me the anti-dollar train of thought that has not only been coming down the tracks of time straight at us for more than 40 years, but is bearing straight down on us today. Or, dismiss these thoughts if they make you uncomfortable because of everything the dollar system has taught you since 1971. But do so at your own financial peril.

I do not want a one world currency, and in fact, I think it is most unlikely. I am not anti-dollar. I am not anti-American. Quite the opposite! I am simply an observer, reporting what I see... from my own little perch on the poop deck of the Titanic.

A Paper for your Property

Let's start off with a fantasy visualization. Have you ever checked your coat at a show? Yes, some people still do this. And the coat check clerk will give you a small paper ticket with which you can retrieve your coat at the end of the show. No? You've never done this? Okay, then imagine the valet ticket you get when you drop your car off at the front of a nice hotel. One small piece of paper with a number on it represents your right to later retrieve your car.

Now imagine that I, a smashingly handsome salesman-type character hanging out near the valet line, offered you a very special valet ticket, one that was good for ANY car in the valet lot! How much would something like that be worth? How much would you pay for such a magic ticket? (Assume that it is totally legal.) And if you bought it from me, how long would you feel comfortable holding the ticket before you "tested it out" to make sure it was really what I said?

Now imagine that I offered you another special valet ticket. Only this one was good for any car on any valet lot anywhere in the world! Would this one be worth a little more? Assuming you redeemed the first ticket I gave you successfully, would you be willing to take this second, "global" ticket home with you? Maybe test it out somewhere else, like Italy?! On a nice Ferrari perhaps?

Now imagine that both tickets performed perfectly and legally as advertised. Can you imagine how such extremely special tickets might circulate as currency, only rarely getting turned in for a car? Especially if they cost less than the outright purchase of a car?

So now that my little experiment with special valet tickets has caught on, imagine that I start printing them wholesale and selling them far and wide. They clearly exceed the number of cars parked in valet lots around the world at this point. And perhaps at some point soon you will realize that such a wide distribution of these special tickets raises the odds of your own car being reclaimed by someone else!

You see, even if all these fantasy auto ownership transfers were somehow legal, the circulation of "universal valet tickets" would make car ownership very AMBIGUOUS. If you hold a ticket, do you really own a car? If so, what kind is it? And if you own a physical car, how long before someone takes yours?

I suppose at this point you would stop leaving your physical car with the valet! Right? With odds like this, sooner or later someone is going to take YOUR car, and perhaps it will be the last one in the lot! And as this perception spreads, less and less cars will be entrusted to young valets around the world, putting them out of work and sending them to the unemployment line. And with empty valet lots all over the world, what do you think will happen to the value of all my little paper tickets?

So... Is Gold Money or Not?

When gold was used in straight trade it was not money. It was simply gold, an item to barter with. In fact, it was the very best possible item to barter with. And because it was the very best property to own for future trading purposes, it became the wealth reserve par excellence.

The very concept of money evolved from the coinage of gold (the barter item) allowing for a numerical accounting system backed by rudimentary laws. This allowed for the emergence of great civilizations. These civilizations died off eventually when the legally enforced parity between the numerical accounting system (money/a medium/an incomplete transaction/ambiguous ownership of the physical world) and the physical market place (gold/barter/complete transactions) was stretched to the breaking point.

What we have today is a breaking point that will return gold to its ancient job, wealth reserve par excellence. In this role, gold will be revalued by the global marketplace, in its physical form only, to somewhere between one and two orders of magnitude higher than it is today!

Perception is the key. Early in the life of a currency (like my valet ticket currency or paper gold) full value parity is the perception of the masses. But there always comes a time when the masses begin to perceive that the outstanding claim checks outweigh the tangible deposits. And you can imagine what this shift in perception does to the per unit purchasing power of the paper tickets.

When we proclaim "Gold is Money!", we give the bankers full license to treat gold just like they treat money. This opens the door to AMBIGUOUS notions of ownership and lost purchasing power of the metal itself.

The best reason to pursue this concept, to cement in our minds that gold is simply property, simply the very best tradable, tangible item, is to end the misguided attempts to use gold as a currency by those who will not let gold simply be gold. So we call it "wealth", since our Western upbringing forces us to "pigeon hole it" (and "wealth" IS what is should be called anyway). But be careful calling gold money, unless you are prepared to retract your statement when unexpected wisdom visits you like puberty some fine day!

A deep contemplation of the "honest money" concept will reveal some longstanding misconceptions about gold, the physical item. Your personal journey to understanding money must *MUST* encompass two very influential factors. The first is banking. And the second is government (or law). In other words, you can't claim a full understanding of the money concept without a commensurate understanding of its defining institutions.

Banking institutionalizes the accounting of money while government, or the Rule of Law, institutionalizes the vitality of monetary contracts. How well these two operations serve a society is revealed in the value that society entrusts to its monetary unit.

Gold is the perfect physical property existing in nature, used by and passing through these evolving money systems in cyclical ways. The exchange of a lump of gold for something else of value, say a chicken, is a barter exchange. It is a full transaction of physical items. There is no "medium" in this exchange. But it was the evolution of gold from lump state into coined state that catalyzed the emergence of the money concept as a pure numerical system.

The money concept emerged as this new numerical accounting system peacefully coexisted with the physical barter exchange world of the property item gold. Together they grew and matured, because an UN-COERCED marketplace of physical exchanges (including gold) was allowed to "GEL" with the new Rule of Law and the new numerical accounting system. This symbiosis, while it lasted, allowed for great advances in human civilization!

The problem with the US dollar as a monetary concept is that it was never actually allowed to gel with an un-coerced marketplace. And the problem with gold today is that it has a low barter value because it is not free to behave like a piece of physical property. It is encumbered by the bullion banking system as a token standing behind an artificial value created by derivatives trading.

The risk that has developed is that the US dollar will collapse if this low priced gold is removed! This low priced gold is THE stabilizer in the unbacked US dollar's 38 year bid to be the world's currency. But if low priced gold becomes HIGH priced gold, then perhaps the dollar has failed in its bid to be "money par excellence".

Newer currencies like the Euro are trying not to make this same mistake. They want the marketplace to form a stable network of pricing and contracts without the false pretenses surrounding gold. They are refining the evolving money concept in the hope that it will gel with the physical marketplace. They mark their gold reserves to whatever the market says they are worth, and they don't fear a price rise because it will only make their reserves more valuable.

In fact, they even encourage the free trading of gold by making it available at common places people go! Why do you think this is not done inside the dollar's zone?

If this new and improved money concept works well throughout the transition to Freegold, currencies like the Euro that adopted this new concept may actually become the world's first full fledged money, in the most proper use of the word! In fact, by trading peacefully along side an un-coerced gold market, they could even be said to be "honest money"! At least as honest as the Rule of Law that stands behind them.

This is not an argument for saving, holding or trading these currencies for profit, but instead it is an argument for using as a medium only currencies that "gel" with gold used as a parallel reserve!

But of course, as we know, the Rule of Law can change as the hungry collective elects socialists into office. This is why we will use honest gold property as our core wealth holding! We will own it to compensate for the human inability to create PERFECT money!

In other words, because we have to settle for using, AT BEST, a system of honest money which will always be flawed by human nature, we need GOLD to return to its ancient job description as perfect property. The kind of stuff that can be OWNED, not "as money," but rather, OWNED....... (wait for it......).... UNAMBIGUOUSLY!!!!

Political Money, Political Gold

Today the ten-year-old Euro currency is not defined as any certain quantity of gold. Instead, it uses gold as a financial reserve so that each increase in the price of gold brings an increase in the Euro's reserves and thus an increase in the value of the Euro itself! This Freegold concept is closer to the tenets of Libertarianism than the gold standards of the past because of the gold exchange restrictions that always inevitably followed a gold standard.

Freegold is not a new currency. Instead, it is a completely sustainable exchange system between transactional fiat currency and gold, the wealth reserve par excellence!

On an individual level, the idea that your wealth is meant to be placed in harms way in order to earn a yield is a perpetual lie of the current inflationary system. Low risk yields cannot beat real inflation in the long run, and they often don't in the short run either. Your hard earned wealth was never meant to be risked. It only needs to be preserved!

We view the US dollar's value today through the window of the USDX, a relative comparison of the dollar with its most significant trading partners, primarily, the Euro. But imagine the situation of an exploding gold price combined with a terminal dollar. The ECB could easily use not only its dollar reserves to buy up spot gold, but it could also print Euros outright to buy any gold still offered for sale.

The dollar, on the other hand, must SELL gold if it hopes to slow its own collapse. So the dollar must sell gold to defend itself, while the Euro is free to BUY gold while defending itself from a systemic collapse!

Freegold will not compete with the Euro the way it will with the dollar. Freegold is not a competing currency to the Euro, but instead it is a wealth building asset within the Euro's monetary construct! As this transition unfolds, even the raw printing of Euros for gold, normally an inflationary event, can strengthen the Euro from within its golden asset base. Architecture! Planned, executed, now in use.

FOA taught us that clarity in understanding this new gold market comes from the understanding that there are many political factions involved in this dramatic monetary evolution. The largest pro-gold factions are actually those that want a global currency that is not subject to the health of the American economy (or ANY economy for that matter). Currently, most forex reserves held by foreign central banks are merely a debt of the US government, backed only by a properly functioning, tax-paying American economy.

You would be surprised how clearly this concept is understood outside the USA. It is quite an uncomfortable position to be in, to have your wealth's very existence depend on your neighbor's ability to produce enough income to service his unsustainable debt!

These most-pro-gold factions are not necessarily the ones you would think. They are much of Europe and the oil producing Middle East for the most part. These are the major factions that will be hurt least by a collapse of the dollar's economy, because they have been preparing for it for decades. But others, like China, are starting to come on board with this anti-dollar, pro-gold movement. (Perhaps even India too?)

These political factions are not interested in a new gold standard like the failed Bretton Woods system. No, they are seeking something far better. They no longer see any advantage in holding a Treasury promise of future payment (half a transaction) over holding physical gold as a payment in full. The fact that Treasury's pay interest has become a joke in these central banking circles. They see clearly now that economic instability and currency fluctuations can easily wipe away any interest earned, overnight!

No, the only reason left for holding these paper reserves is the futile effort to stabilize a collapsing system. You hold foreign currency today so that you can sell it to buy back your own currency if it falls. Or you buy foreign reserves to lower your own currency if that is desired. This is not a game of wealth accumulation as it has been played. And this fact is not lost on many countries outside of the dollar zone.

On the other hand, buying gold on the open market, using either your own currency or your excess Treasury's and dollars, creates a far different exchange/reserve dynamic. It takes physical gold off the market, increasing its value. Gold has always been the dollar's only competitor for global exchange reserve status. And no nation will ever run out of its own currency (which it can print) when buying gold. Of course this will drive the price of gold sky high, but from a CB perspective it is viewed as taking on reserves, not selling them off.

Basically, this is the direction the entire non-dollar world is heading. This new system is not being built on the foundation of any single nation-state or economy. In the future, any one fiat or its attached economy can fail completely without bringing down the whole system. This is what stability is all about. It is the separation of the money concept from both gold, the tangible, tradable physical wealth reserve, and from the albatross of the hungry nation-state.

Would you like to get a glimpse of the future the way the Giants see it? Pick any price for gold. Say, $39,000 per ounce. Then list out the CB reserves of each country as they are now, and also as they will be when their dollar "assets" are worth maybe a nickel on the dollar (purchasing power) and gold is $39,000. This will give you the "birds-eye view" that they have their eyes on. With this view it is easy to see why there is a movement to end the dollar standard, which is backed only by a healthy US economy. In other words, it is currently unbacked!

When you understand how it is, that it is economically (and therefore politically) undesirable for other major currencies to appreciate against their peer currencies (which is exactly what would happen to any currency replacing the dollar’s reserve status), you will subsequently know why gold shall continue to emerge as the de facto solution to the international reserve question.

And here I emphasize de facto rather than de jure because this has become a global phenomenon driven by a natural evolution (survival and ascent of the fittest) and does not require any additional international treaty or enabling legislation as a prerequisite or for motivation.

The breeze is fair and the road ahead is clear for the ascent of gold. -- Unknown (but wise) Author (11/05/09)

Sincerely,FOFOA

Credit for elements of this Thought mash up go out especially to Aristotle and FOA, but also to Belgian, The Invisible Hand, MK, and of course Another. I stand here in full view because I stand on the shoulders of true Giants! Thank you all!

107 comments:

Brokers and traders will show you, "turn your gold into wealth", "put it to productive use, Trade It"! "Sell your gold and buy it again, many times". "Do this and find the value lost from your youth"!

But I say, spend your time in the company of truly wealthy ones, see how they make gold lie very still! Know this now, the world will again, in your time, feel value in gold as never before. And that value will be as the "productive use of holding wealth thru the fire of change". "Yes, you can also walk in the footsteps of giants".

Yes, FOFOA, again a very nice piece delievered. The only problem one has with your post is that you only focus on Gold and Paper. You seem to look at these items from the point of view of an inocent world, only a little corrupt or disrupted. But it is much worse. It is a world or better said its population is endagered as never before. You mostly do not mix up with politics, but Gold is not just monetary policy, it is much more a way for the humanity to fight for freedom. As long as people are stupid, saturated, consuming crap and have no interest for politics, we will remain slaves with or without gold.Only when all people around the world will be able to understand how corrupt their goverments are only then they will stand up for freedom.The Americans never gave a damn times before what their government did abroad as long as they could spend the riches of the world. Now they increasingly seem to feel on their own experience hw explotation feel. Yes, we will have gold as money but only the day USA will be broken and that intrinsically.I see that as your duty, dear Americans.

Fascinating, I am still coming to terms with the philosophical properties of Gold, but your articles are really helping me understand these finer points. My gold looks even better after I read your work.

You’ve covered a lot in your post, but seeing that you’ve place a reference to me, the golden foiled hat wearing Ender, I will make myself available to answer any questions you might have. I will do my best to help assist FOFOA’s new readers.

That gold… If the CBs around the world hold 30% of the known gold, who holds the other 70%? If CBs claim to hold 30% of the known gold but have knowingly leased more than 50% of it, where is that gold? And, how much gold do the CBs really own? If the CBs of the west have guaranteed more gold than they are willing to part with, do you think they’d whined down the distributions in a slow and steady rate?

If you knew that a market had been cornered and your charter was to maintain price stability in the currency and high employment, could you use your understanding of the results of the cornered market to enhance your charter? … That is just a thought to ponder.

Do you see where the gold will come from to drive settlement?

I do not understand “The feds would sell the gold for what, local state currencies?”… I say, why would ‘the feds’ sell their gold?

And, a conversation for another thread, there will not be another receipt based currency. If need be, the US will learn to handle multiple currencies – like everyone else in the world has had to do for years.

Now, I think I will validate my valet ticket! Another great article FOFOA.

Mortymer -> FOFOA: Only now I read what you linked in previous post comments: (http://fofoa.blogspot.com/2008/09/freegold-archaeology.html)How relevant!.The feeling of connecting dots is like waking up in the morning and rubbing your eyes to see more clearly - it is the brain what starts to work.Thanks

In your comment that FOFOA linked to, you wrote: "An alternative is to put as much gold into the economy as you can and give it the role of being the safe haven for savers and NOT get into the business of facilitating settlement."

One of the nice things about this comment section that FOFOA so kindly sponsors is the international flavor of the comments. As a US born dual US/Swiss citizen, I have keen interest in the development of freegold in the US. I understood your statement to imply that after the dollar collapse that the FED or other PTB would try to get their gold into the hands of the population who would be desperate for some kind of stable currency.

The scenario you write above in this thread would be post collapse or after a run on the paper gold market. So to answer your question, I don't see where the gold will come from to drive settlement. A lot of paper will either be defaulted upon, or paid off with a few trillion shiny new Bernanke-bucks.

My real problem is figuring out how a value for "new dollar" could be set to freegold after the "old dollar" collapse. FOFOA has once again described how the EU has wisely position the Euro to phase into freegold and I can understand that.

But I think the "new dollar" will have to be gold backed, or why would anyone hold it even if just for a few days to complete a transaction? Would you exchange gold for a valet ticket if you knew there were no cars in the garage and not even a garage?

When Hitler came to power, one of the things he did was print a kind of voucher for labor (I don't have the details in front of me) and use that to start infrastructure projects. Perhaps the new US government will be forced to try something like that, but it is too much for me to conceive of how that would come about....

Mortymer -> Ender: Exactly my words about of ticket validations :o) It is so funny and hilarious to speak about this issue with others. They think you are from different planet, so scared that they loose this system they live in, Argh!

BTW: (http://www.bis.org/statistics/relcal.htm)I think it was the Feyman who told in his interview with BBC that when you do not know something you should consult authorities. Looking forward to next report 7-12-09.

People, if you do not believe just do your research. I am on that for about last 1,5 year, almost daily. (Curiosity).

Just 1 comment: How strange is that such a person as me (32y, ok job, young family and interested in many things goes and turned his savings into few oz, keeping strong cash flow in order + some extra measures just in case?) Isnt this strong case already? OK, I studied economics but found out that theory does not match reality so I started to wander and this offers so far the best explanation.

Note: Even better than gold is good integration in society, this worked in past in bad times, friends, connections is the best insurance (East Europe experience).

Are you sure you're not over-stretching this? Gold after all is just a material produced by nature. It does not have a mind and it cannot think. How can it incorporate philosophical properties? Those I believe are a sole attribute of the human mind I believe. We can ascribe properties to gold, but the philosophical ones sprout from our very minds, not from gold itself.

Note: Even better than gold is good integration in society, this worked in past in bad times, friends, connections is the best insurance (East Europe experience).

Perhaps so, although I'm a bit speculative here. If real value will flow down the wealth pyramid into its golden base, so might the social/human capital invested in our current financial system seek to hide somewhere, should a transition occur. That might be personal relationships indeed.

Mortymer to Martinj:I do not doubt the gold, I am just highlighting that for the daily life after any big socio-economical change is needed a good relationship network.

If you wanted to go higher after Velvet revolution (1989), during our descent from proud state into 3rd world country, you needed courage to change your attitude, occupation, you needed capital (gold, hard assets) AND people connections.

The vary same people in power who knew beforehand what will happen converted and then after the change invested again in profitable enterprises. As simple as that. So NOW there is still the time to convert some part of your savings which are in danger. There is nothing big about it, it stroke my family many times and each time it is the same story. Well, but then we work hard each time to catch up the lost to keep on level and that is what makes us happy.The rule is to keep property, land, connections to friends, some hard assets and check your helth.

For US citizens: Weak state will make things worse, not better, the first thing you need to do is to put to trial those who caused it. We did not do it and the result is more corruption -> path down.If the court system is in mess there is no hope for you. To change that you need much deeper dip, untill then you do not have much chance as the political will is missing cos trying to keep the status quo.

I paid a little less than what APMEX is charging for their 1g Pamp Swiss gold bars. But it doesnt matter the price fellas, because .999 is what Im after. With some kind of reputation stamped on it.

Id buy coins, but .999 are difficult to find in my neck of the woods. Plus you non traveling folks need to get out and test the waters with buying and selling gold. Banks are just not interested in buying back the stuff that they are peddling whether it be coins or bars .999 or not.

Ive tried to take coins to banks to sell, they say that once the coin leaves the bank it becomes numismatic and they dont have experts to value a numismatic gold item.

Even Jewelry shops dont know how to value .999 coins unless they are coins from inside their realms. I.E. When in the Balkans the shop owners will buy Turkish Lyras from me but they wont buy Maple Leafs because they dont know how to numismaticly value Maple Leafs and they dont have equipment to test the purity, so they just say no to the hassle. Of course theyll buy the Maple Leaf at scrap price because gold is gold to them. But why would I sell .999 Maple Leaf for scrap?

The point is guys, that FOFOA is completely right from a philosophical stance and from my own and others international gold experience. They are putting gold into the peoples hands and they are not interested in getting it back. At least not yet;-) Freegold is going to happen, or gold is going into permanent hiding.

The more I look at the Euro architecture the more I agree with FOFOA that for some reason these greedy bastard bankers are going to stabilize the world financial system with Freegold. And copy the Euros example with other currencies.

The question everyone should be asking now is: Why are the greedy bastard bankers doing this?

Mortymer -> Anon 3:12: You have worries for nothing,.. they will learn about gold soon :o) as the price will force them to do so. And bankers? Let them have their problems, they have many of them, changing the business model is a hell of work for them.

Mortymer to Martinj:IMHO it has been tried already, all or part of it is gone. It does not make a big difference if via physical or via paper gold. I will be surprised if there is still some gold to be released and if it is such case it can not be allowed to go to the open market for obvios reasons and the fast transfer would go anyway via BIS.Such step would only trigger big players to snap it asap for their paper or dollars.

On an individual level, the idea that your wealth is meant to be placed in harms way in order to earn a yield is a perpetual lie of the current inflationary system. Low risk yields cannot beat real inflation in the long run, and they often don't in the short run either. Your hard earned wealth was never meant to be risked. It only needs to be preserved!

I believe this statement to by very key. We do live in a system that forces one to risk their saving in order to preserve wealth. One can argue on whether this is good or bad. Maybe the risk mentality keeps money in motion and prevents hording. I for one don't see this as the way it should be, but it definitely is the current world we live in.

For a quick and dirty answer we can subtract the expected gold inflation rate from the dollar’s inflation rate (~8.5% less ~1.5%) to arrive at a rough guide to what gold’s average value for 2009 could be in terms of US dollars. The average value of gold was $762 an ounce in 2008. If we now add ~7% to that we arrive at an estimate of $815 an ounce as the average value of gold in terms of US dollars for 2009.

Take note that that is an average value for the year, and not a year-end or current date value. Nor is it a price prediction. This method of valuing gold is an attempt to quantify the value of gold, not predict its price.

The reason for doing it, though, is that we can see what effect the monetary inflation rate of the US dollar has on the value of gold in terms of US dollars. As you can see, the Fed’s activities have indeed had a positive impact on the value of gold, but not nearly as much as the market is factoring into the gold price.

The average gold price for September was $997 an ounce and gold is currently trading well over $1,000 an ounce. The current gold price is more than 25% higher than its estimated average value for 2009, and even though we would expect the current value to exceed the average value for 2009, it would not be nearly by that much.

The market appears to be too fearful of inflation and has factored too much potential future inflation into the gold price. The Fed clearly announced that it would end the monetization of Treasury debt by the end of October this year and the monetization of agency debt in the fist quarter of next year. That means that in six months’ time the Fed will stop creating inflation. I realize that the FOMC could decide to extend the monetization of debt, but at this time we have no reason to believe that it will. Therefore it seems to me that the current bout of Fed manufactured inflation is coming to an end.

The US government, however, will continue to run a massive deficit that has to be financed with the issuance of Treasury debt. Assuming the Fed stops supporting the bond market and the Treasury keeps issuing record quantities of new debt, we can expect to see US interest rates start moving up.

The current level of interest rates in the US is historically, and unnaturally low. Interest rates will rise. It’s a question of “when”, not “if”. Given that the Fed has announced it will stop supporting interest rates in six months, and that the market is forward looking, it could be sooner rather than later.

Rising interest rates could be positive for the dollar in spite of the massive issuances of US Treasury debt, and that could put downward pressure on the gold price since the gold price moves inversely to the dollar’s exchange rate.

So in spite of the fact that the Fed has been inflating the US money supply by monetizing debt, and in spite of the fact that dollar-bearishness is in abundant supply, and that the US dollar is very likely losing its status as the sole reserve currency, there is a good chance that US interest rates will have to rise and that could cause a rally in the US dollar and a decline in the gold price.

Gold bugs have been conditioned to believe that the gold price has to rise in times of financial or political turmoil. But that is not necessarily the case. Lately, when greed dominates the market large institutions buy emerging market and Asian assets, and sell US dollars. That puts downward pressure on the dollar exchange rate and causes the gold price to rally. In other words, the gold price rallies when things are going well and greed is the dominant emotion.

When fear grips the market institutions sell emerging market and Asian assets and buy US dollars, sending the dollar exchange rate higher and putting downward pressure on the gold price. So when things go bad, the gold price falls.

During 2008, in spite of the fact that the United States was the epicenter of the financial crisis, the US dollar rallied, money poured in US bonds, and the gold price fell. Just a few weeks ago, when the US housing data disappointed the market, the dollar rallied and the gold price fell.

The belief that the gold price will respond positively to bad news and fear could well be misplaced, and is certainly not supported by recent market movements. It also ignores the fundamental and underlying factors that determine the value of gold and moves its price.

Given that the gold price is trading at a 25% premium to its fair value and that we can imagine several scenarios whereby the US dollar could rally and the gold price could fall, it seems to me that betting on a higher gold price right now is merely a bet on the Greater Fool Theory. That is not to say that the gold price could not continue to rally – markets can remain irrational far longer than rational people ever imagine they would. Personally, though, I have no interest in buying an over-priced asset in the hope that it will become even more over priced – not even gold.

Paul van Eeden

The first flaw to his argument is... "$762 an ounce in 2008.", so he assumes that gold was fairly priced in 2008. But what constitutes a fair price of gold?

he current temporary calm is all Bernanke can hope to achieve before $2 quadrillion of liquidity collapses onto whatever truly tangible assets exist. They don't call it a pyramid scheme for nothing. And by assets, we are not talking about the crap that the Fed collateralizes against in its Discount Window and Primary Dealer Lending Facility taxpayer handouts. And for the goldbugs: $2 quadrillion (mythical liquidity) collapsing into $2 trillion (hard assets): can you spell $1 million an ounce of gold?

Natural selection can only select from information that is already in the system. There has been no evolution to gold. Just the degeneration, bursting of a paper abcess on the body to leave what was always there and waiting... gold!

2. He believes in gold stocks, showing us again that he thinks within a legal universe that these scammers have constructed.

What good is his advice and estimation if / when the government lies? Or when the government takes possession of gold mines?

Most anyone who side with this line of thought, that bad things can not happen, because too much private interest is there, in those same gold mines, completely ignore soviet and latin american experience, where it has became painfully obvious, that government can and will pay off and otherwise deal with important stakeholders, thus welding their silence in nationalization matters.

So, with all huge respect to Eeden for all matters of gold technicalities, he is no better to me as a wise guide than John Mauldin.

These people haven't shown that they can think independently of the environment they were designated to obey.

Would you agree that freegold would be for the conservative, long-term-oriented people?

As it would be for storing value over time, storing wealth in gold would only be relevant if one would want to store for a relatively long time and take no risk.

People that would want to "put their capital to work for them" would rather invest in the stock market or the like (being exposed to the accompanying risk off course). And people that only save for a short period of time might also not have to much incentive to get out of paper, or would they?

Taken the above into account a percentage for gold of 5-10 percent in the average portfolio might seem a reasonable guess.

Your view might hold water if we had a smooth, no-fire transition to freegold. But what will happen in reality is that gold will perform in its most impressive (high profile) role, delivery of wealth THROUGH an inferno. And that inferno will destroy the paper game. There are two ways to lose in paper. The loss of value in the paper product, and/or the loss of purchasing power in the denominator of the paper product.

On the other side of the inferno, paper will be discredited and all that credibility will have flowed into gold. The paper investments that will emerge down the road will look much different than the shoddy ones today. As will the attitude of the masses toward the lie of the yield.

A yield is COMPLETELY WORTHLESS if you lose your principle or purchasing power. Risk means you can lose your principle. Much principle (and purchasing power) will be lost.

You are still thinking within the $-system box. Think outside of the box. Your CORE WEALTH is NOT meant to be risked. The average person, meaning 99% of the savers should not, and will not be risking their core wealth. In the future those "venture capitalists" that do risk their core wealth will be much more diligent with regard to risk, and they will be looking for much higher yields than we have seen in decades. They will be active participants in their investments.

Also, remember that the savers themselves only represent a percentage of the population. Those living paycheck to paycheck will not need gold.

You write, “…I don't see where the gold will come from to drive settlement.…” that is why I asked, in different words, do the CBs of the world hold all the gold? And, I will answer it – no. They hold but a small fraction. The rest is in the public domain.

If you were to settle your debt today, how would you do it? Why, you would call your local coin dealer and trade currency for gold. At that point, the debt to you has been settled. Did the CB get involved with your transaction? The debt in the system remains, but you have cleared the debt owed you.

Call your gold supplier and tell them you are in the process of diversifying and you’d like, over the next couple months, to acquire, say, 1500 1 ounce rounds and see what they say. Are they available? I’m willing to bet that they would find them.

This interpretation “I understood your statement to imply that after the dollar collapse that the FED or other PTB would try to get their gold into the hands of the population who would be desperate for some kind of stable currency.” … is in need of refinement. Gold is already in the hands of the public. As the dollar collapses, the gold held by the public will gain value in the hearts and minds of people.

If we get to the point of creating a new dollar, it will not be hard to value. Debt is directly related to personal labor. The value of labor in Europe, India or Egypt may all be the same in the coming years as globalization takes a greater hold.

Does this give you a better idea of where settlement will come from? Remember, the Freegold concept will establish a pure physical market that will function in every country for every currency. Those that acquire extra currency, can settle for gold at any moment at the current market price.

In the past fw years, Jim Sinclair at jsmineset.com has espousd his beliefs in a decidedly supportive, gold-linked $US.He has made many predictions for the gold price, and no longer publishes his personal charts and technical analysis of gold. He stopped posting these 'trading charts' with their power uptrend and power downtrend lines as well as long and short term support and resistance information because of the abuses and misunderstandings that arose from the practice.Recently he has not elaborated much on the "rejuvenated, revitalized gold certificate reserve ratio" for the $US, but he still expects it.He also says this $US denominated gold revaluation for this purpose and for global reserve banks to stabilize THEIR currencies, is inevitable, will prevent the total collapse of the $US some expect, will require a new international monetary system, will use futures or options on exchanges to maintain the new price at the reset and a narrow range, and will not require audit of US Treasury gold since their word will suffice if it comes to that.These are his opinions and there have been related essays on gold-backed dollars and fiat currency from the CFR's Ben Steil and a senior economist and fellow at the DC funded Cato Institute, and Ivy League academics in the Wall Street Journal and banking officials in the European press as we covered at Usagold.com and often GATA. So they are voices reinforcing Another and FOA's predictions and warnings with their own flourish.

We agree. I was thinking past the transition. Off course the transition itself - should it occur, I still do not take any future event for granted - will be very dynamic. During that period it's would be far, far better to be in gold than to be in paper, but once the new system is established only a minority of savings is likely be in gold.

It is possible to apply the intellect to understanding the essence and properties of, say, gold, without gold present, you dont need to ecounter the material object to understand it's properties, the properties co-exist and manifest themselves materially in gold, such as durability and flexibility, these are concepts perceived by the mind and gold can be said to physically represent these concepts. Gold, if we analyze durability, is in fact more durable than a human, therefore in this sense and concept Gold can claim this inherent concept as its own as much if not more so than a human. Whether the human mind percieves it or not it still is a material manifestation of a concept.

It is exactly why I think freegold might not happen. Sure like .1% ofthe population knows, like us, that we got ripped off but no one else would know or care.

I believe in gold but their is some big time organizations, TC, CFR etc that don't want us to have anything. And they haven't wanted that for years.

If FOFOA could explain why TPTB will give us some crumbs from the table I could buy this.

These guys have been working on a global currency since the middle of last century. Do you think they are gonna give up now?

Why do you post about the doubters "bla bla bla"? Maybe you explained it somewhere and I missed it.

Does a one world currency mess up freegold in your opinion?

I have seen some anon posts on this subject that don't get replied to. I am not trying to be difficult and I agree that there might be a gold friendly event. But long term gold won't be the answer either. But when that event is here, we will know it already.

Again great blog and super duper insightful. I just don't see consistent replied to the political doubters. Your scenario us just WAY to utopian for me.

But I guess Jim Sinclair is saying the same thing just with different tones.Sorry if this was too terse. I just wish I would see a tip of the cap to potential other outcomes. But again, maybe you are right and this freegold is a freight train coming down the tracks. What I do KNOW is when/if freegold happens, it won't be for us, the "huddled masses" like you say it is.

PS Thank you to the poster who added that youtube of the guy trying to sell the gold maple. That is SO SAD, the sheeple, getting sheered and don't even know it, and it's gonna get worse. My maples in my little box were screaming at the PC "buy it" "buy it". Pool little Maple :).

I like FOFOA very much, but, like yourself, I just do not find any justification to believe in Freegold.

Am I against it? God knows I am not! I would like to see Freegold happen.I never called this idea Freegold myself, and the idea is far from being new. I think Rothbard (correct me) said that the crime begins when we allow someone to designate an official name for the weight of gold, such as "dollar".

This then allows the government to manipulate public in first accounting only in those "dollars" and then the way is open for reducing the gold content in it.

This is the dollar well traveled, for as far as we can tell Roman Caesars used precisely this approach. All that changed in the technology of gold debasement is that the trusted unit is no longer a coin of realm but the paper note.The fractionism did not change the nature of the swindle.

But I think that there is an unfortunate difference between the realization that only Freegold can be perfect, and the reality. It is the same difference as between desirable and achievable. If the world was populated exclusively by people minding these matters, such as ourselves, there simply would not be another choice but the Freegold.

Unfortunately, most people do not care, did not care, and won't care.This is the majority. Did the schools run by the government got outlawed? No! And why are they in place? Precisely to insure that majority of people remains blind while raped.

To suppose that Freegold becomes real is to be so idealistic, as to forget that the governments must rape and steal. How are they going to do that with Freegold? I'd like to see that answered.

How is the "hungry collective" going live of the sweat of those being milked? Will they like Freegold? Are we no longer going to have welfare state? I would love that. But, why would dole receivers ever allow that to happen?

Does anyone calculated how much tax has to be taken openly if there is no confiscation by inflation?

Freedom is not achievable in democracy. Is the democracy (as currently taught in schools) going away then? We no longer going to have a vote on other people's property?

I am sorry, but besides beautiful descriptions of the bright future, I'd like to know how are we going to deal with parasite opposition.

I am sure that after the crisis, we will end up without reserve currency, until next major war, that is. But we will still each (in our respective countries) have the same old scam running. Saudis are interested in Freegold? Only inasmuch as it would help them to get paid internationally, I say. They would still be perfectly happy raping their own in the meantime.

I just reread my own post and found that I am still not as clear on this, as I would like to be.

More precisely, my point is, that until a more insidious tool for mass plundering is found, or the productive people agree to be openly raped, the paper currency will remain the instrument of choice in any society without private property rights.

Our is such society (US). Anything can be taken from anyone by a collection of voters none of who can claim any right to the property being taken. Either parasites must go, or the producers must stop producing, for the instrument of covert confiscation (paper money) to be put out of it's use.

Thank you and the participants in these discussions for helping me "to walk the trail".

I read a post from Desperado earlier about gold and settlement. I offer a few remarks concerning possible conditions after the "Waterfall" event predicted by Martin Armstrong that I think could be the advent of Freegold.

Firstly I think FOFOA has said that gold might go into hiding for a time after the paper gold and other markets blow up but that it would be short-lived.

If I understand his reasoning once currency is permanently priced in gold at a realistic exchange value it will be "safe" to move back and forth between gold and a sound currency in the future as our needs dictate.

One of the key issues that Prof Fekete has, I think, correctly analysed is that the No. 1 systemic issue is that capital has been destroyed. So the issue is insolvency not lack of liquidity. Perhaps all the talk of liquidity is dissembling to fool the public ie. these are not permanent "hand outs" just temporary "liquidity".

I subscribe to the Austrian Economist's capital theory ie. that capital can only come from savings. By extension debt cannot substitute in the role of capital without ending in disaster.

Perhaps it is part of the Giants' plans to be holding huge amounts of gold (= savings = capital) to pounce on enterprises and institutions who need to be recapitalized thus obtaining assets at deep discounts to their intrinsic or strategic value.

Desperado, you also commented: "I understood your statement to imply that after the dollar collapse that the FED or other PTB would try to get their gold into the hands of the population who would be desperate for some kind of stable currency."

If I understand it correctly the objective is to get gold into the hands of the citizens (outside the dollar bloc countries perhaps) BEFORE the event. So that the gold market is broad, deep and liquid and capable of fulfilling the Freegold objectives eg. so the Giants can "harvest" the latecomers.

Desperado I sense that you too are concerned about how the PTB will attempt to rob the small gold holders if they try to "cash out". If anyone feels that this is worth discussing I have a few thoughts to share.

What makes you too think that freegold is so idealistic? Is it because you own some gold and it would be idealistic for YOU???

Freegold is what we get next because the paper as failed in the confidence game. The con must be reset, rebooted from a solid foundations. Get some gold now so you yourself survive the carnage and the burn. It is now.

Mortymer:For many: Please read again Another, FOA and check historical data, then make conclusions.The freegold is unavoidable.- Gold rising for last decade- Net salaries lowering- Purchasing power of money lowering- Repricing of essential products on big scale- Stupid/not needed jobs dissapearing, manufacturing jobs lead economies again- World economy about -1/3- More corruption, mess, no good time for business = desintegration of old systems- Oil rising when usage goes down- Many people try to think alternatively trying to decouple from system- etc.I could continue like this for quite a time but it is a process to change perception. Compare with gold, not dollar.

Yes, the ratio of buy/sell gold does not encourage to invest for short time but this will change once gold goes again into backwardation. Check yourself.

Do I care that I pay a bit more/less for oz? No, I am happy it is still available.

Because the problem is not the paper currency. The paper currency is but a means for a welfare state. The welfare state is the problem.

This is the cornerstone to understand. Welfare state is the problem.

Where am I coming from? Austrian approach. Do I own gold? You bet.Am I saying gold is not the way? No! It is the only vehicle of escape. But it is not, the vehicle of the solution.

One can not have thieves and not have anything stolen at the same time. This is impossible, agree?

What is the welfare state? It is the state without private property. It exists as a symbiosis of two parties: The parasitic majority and the ruling thieves. Actions of each help each-other.Paper currency is nothing but their tool to acquire wealth. This wealth is produced by a productive minority. The majority is not afraid of the confiscation through holding of paper currency. Why?Because, they receive more from the state than they lose through paper. Ruling thieves receive what was "lost" between confiscation and the redistribution. The symbiosis is perfect.

If you had a society that upholds private property, i.e. no mob rule "democracy", then any of the following choices would work perfectly: Freegold, Gold Standard, Fiat currency. It would not matter which one is used.

Freegold idea is naive, because it essentially identifies paper currency legal tender as some sort of unfortunate mistake. As something that just "happens", and is wrong.

I say such talk is suitable for a child. There are no accidental deficits. There is no accidental inflation. There never were a paper currency that existed for any other explicit purpose, "architecture" if you will, than to be the instrument of confiscation in society without cemented property rights.

Gold, is an escape vehicle. It allows one to escape the hidden part of taxation. So, you say heil Freegold. You think it will allow you to escape without effort? I ask you again, how is the welfare state (in it's true definition) be funded?

No. This is not where the solution lies. You can't fix just the consequences. You have to fix the root problem, and it is that in our current society it is OK to take someone's wealth.

I wish to offend no one. Please do tell how can I be clearer. Tell me where my thinking fails or give me answers to my questions.

I don't think FOFOA is trying to fix anything. Well, maybe to fix his PP in something fireproof. FOFOA says he is writing as an observer not an activist. This is a distinction you may be missing.

+1 Krach! Freegold and hyperinflation are already here. All that is left is the big reveal!

Look at Celente on MarketSkeptics for how ideal this will be. I think FOFOA is showing us there is some light at the end of a very very dark tunnel. Who is going to immediately profit from freegold? It is certainly not 99% of the US public! It is the giants, the anti-dollar faction elites, the CBs, and us .1% that have prepared. We are only along for the ride of life! Yes, in other countries that suffered hyperinflations those with gold bought up all the assets and recapitalised immediately after for the next phase. If you own some gold, you join the recapitalisers!

Centralised power structures are going to have a tough time for the next generation. They don't produce. They only steal, and they steal from the willing. There won't be so many willing savers soon. Those idiots in that video don't matter because they don't save. Not much to steal there through inflation, only income taxes. If you save in discrete physical property it is harder to tax than in 401K.

Mortymer: Indeed, this page does not sell, offer anything offensive or sneaky way, just a learning, discussion tool for enlightening purpose and this is what I care here about, and people who write really good stuff into comments.

Youre right FOFOA doesnt address the negative side of things. But like he has said, he is just an observer. Hes not trying to fix anything, or start a revolution. He is just simply identifying what is going to happen. Although I believe his views of what conditions will be like after the event are rather Polyanaish, they are not really as important as the full message that he is getting out to the public.

Personally I agree with you, unless the hungry collective are taught to be productive or are exterminated there is very little hope for a worldwide "Meritocracy".

Non the less, Freegold is baked into the cake as I see it. Now we just have to wait and see, whos prediction of the future is correct when we come out on the otherside of the waterfall event.

On that Celente vid from marketskeptics: bear in mind that people like Glenn Beck and Celente have an interest (both business and ego related) to be on tv. If that means they have to bend their opinion a bit (e.g. make it more extreme), they probably will. I am not saying they are total lyers, but I would advise people to bear what I said above in mind while valuing Celente and the like.

To all; with all the comparisons being made lately to the 1930's I am surprised that virtually no one points out the "small detail" that makes these times not only different but 180 degrees different. Yes I am speaking of money and the lack of "realness" and or backing by metal or anything else. Many advisors say "back in the '30's stocks did this and bonds did that and unemployment was whatever", I don't think a comparison to the thirties is even relevant because the U.S. Treasury was sound and the Dollar really "WAS as good as Gold".

Fast forward to this century and the Dollar is backed by nothing and the Treasury is the largest debtor on the planet that survives only at the whim of foreign lending. On any given day our creditors have the ability to pull the plug on the U.S. financially, as a matter of fact the Pentagon did a study on "financial warfare" last year. The result was the financial destructionof the U.S. by the Chinese. Back in the 30's WE were the Chinese, the U.S. was the biggest creditor to the world and of course we had "excess capacity" in the manufacturing arena as do the Chinese today. Back then the British were the fading power as we are today and they ran trade deficits which drained their Gold until they exited the Gold standard.

The point I am trying to make here is that the financial game is so different today because the money is different. The major players have changed seats at the table and are mostly 180 degrees backward from where they were during the depression. The problem that is unfolding and has become totally obvious to the rest of the world is that the Dollar is no longer as "good as Gold". This was the original deal they cut at Bretton Woods in 1944, then in 1971 we reneged on the Gold backing but got the Arabs to price oil in Dollars and thus the "petrodollar" era. Now even this is about to change as judged by statements from the world's oil producers.

The upcoming currency panic has it's roots in the U.S.. We have abused our right of creating the world's reserve currency and entangled the entire global financial system in our web, if we go down the rest of the world goes down with us. The "games" that the U.S. has played for 50 years or more portraying a stronger currency than in reality has finally caught up to us. The latest comical game being played is "the auction results". This year 80% of Treasury and Agency paper issuance has been bought up by the Federal Reserve and paid for with freshly printed Dollars and each auction is reported as a "success". God forbid the Fed's printer gets a "paper jam" or runs out of toner! Even scarier would be the Chinese or Japanese deciding they want out of what they already have.

Does the game blow up today? Tomorrow? Next week? I don't know and it doesn't matter as long as you know the end game. This end game will include a massive lowering of the standard of living across America. It will take far more Dollars to continue living in the manner we have become accustomed to. I am not talking about 5% or even 10% inflation, the end game for the Dollar will be hyperinflation. The books have been cooked, the Gold is long gone, all currencies are fake but don't worry because the recovery is just around the corner! The scary part is how many Americans know something is wrong but don't have a clue as to what it is because the media continuously points them in the wrong direction. Regards, Bill H.

celente is colorful and accurate though repetitive. His constant allusions to "white shoe boys, mafia names, buonano, gambino, celente etc" irritating. He paints with a broad brush. Having said that, I thing his vision (first promulgated 2-3 years ago now) of societal chaos and bregheulian death and despair "coming to a town near you" are absolutely spot on. He is not to be ignored

Celente is not to be ignored, and I was not telling anyone to do so. He is however also not to be believed for the full monty straight away. I was only advising people to develop their own perspective on Celente, as they should on anything.

Do you remember talking about money and what it is a little while back?

Here is some more reading on that topic:

Money is a commodity used as a medium of exchange.

Like all commodities, it has an existing stock, it faces demands by people to buy and hold it. Like all commodities, its “price” in terms of other goods is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.

Money is not an abstract unit of account. It is not a useless token only good for exchanging. It is not a “claim on society”. It is not a guarantee of a fixed price level. It is simply a commodity.

FOFOA, great article. I'm wondering about what you said about the Euro-system. Are you saying the Euro-system will not burn like the Dollar-system? In other words, do Europeans not need to invest in gold?

Gold is already in the hands of the public. As the dollar collapses, the gold held by the public will gain value in the hearts and minds of people.

The youtube video "Man tries to sell 1 oz gold coin for $50; no takers." reflects my opinion on this. My guess is that most of the commenters here have enough wealth that they are worried about it being inflated away, and they are the exception and not the rule as far as gold posession goes. They say that the richest 1% possess 90% of the US's wealth. I assume the same proportion would apply to gold.

In a hyperinflation like Zimbabwe, the currency loses so much value so fast that people try to spend it within minutes of receipt. Ambrose Evans-Pritcard describes how the dollar and gold are the currencies in use there: For brave investors, Zimbabwe could be the ultimate turnaround story . I have seen youtubes of the Zimbabweans panning for gold too which pumps gold in small denominations into the economy which can be used as a medium of exchange.

The bottom 95% of the US doesn't have any foreign paper or gold, and that is why there wouldn't be any medium for exchange. And there wouldn't be any trust in paper from the federal government (and the states either since they wouldn't have any reserves). The people will be desperate for some kind of stable currency.

Meanwhile, the 1-5% with some kind of gold will be hoarding it and using any other medium of exchange first as stated by Gresham's law.

I don't see how the economy could make the jump to freegold in these circumstances.

I can see that a small country, say Switzerland, could have a somewhat functioning economy running with gold and euro's if the frank collapsed. But the US? Just as with defense, the US has no America to defend the trade routes, so is it with the dollar. If the dollar collapses, then there is no other "reserve currency" like the dollar that the US could use until a non-gold backed currency could gain trust.

That is why I currently think the US will be forced to go to a gold backed currency before freegold could work, and I am skeptical that that would happen soon after a gold backed dollar is in circulation.

Desperado I sense that you too are concerned about how the PTB will attempt to rob the small gold holders if they try to "cash out". If anyone feels that this is worth discussing I have a few thoughts to share.

I would be interested in hearing your thoughts. I am convinced that the US will have a far more authoritarian government after a hyperinflation than it does now. Hitler stole the Jew's gold and murdered them, Stalin stole the Kulak's land and murdered them. Roosevelt may have merely stolen the American's gold, but the precedent has been set.

My biggest nightmare is aircraft born metal detectors that can detect gold...

Somethings to take into consideration about the $50 gold coin vid:He was in a very rich area of Southern California, I know I lived there. And with everything I know about Gold, I would be reluctant to even talk to someone with a camera and microphone. He was coming off as a scammer to those people.

Notice he wasnt out in the Inland Empire where he said he was from. Because in the I.E. people would have followed him home and looted his house.

Plus the Vid was edited so who knows if anyone took advantage of his offer. He was promoting his Illuminati book and congratulations to him for a successful marketing ploy.

Sure there are stupid people out there, but this guy proved nothing. Go out to the Inland Empire buddy and dont edit the Vid and we will really see what the salt of the earth think of Gold;-)

quote : "The new global financial model will be one where currencies are not stores-of-value, but merely transactional and political conveniences. The major coup is that for the first time in history of world, people will trust currencies that have no store-of-value component. They will trust that a free float of currencies against gold will function as a regulator."

The only thing this guy proved is that people do not trust guys that visit the gym too much and walk around the street selling valuable assets at highly decimated prices while being filmed. I don't see what that has to do with the public perception of the value of gold.

I would however agree that lots of people have not yet found the "true value" of gold.

You are right, he did come across as a scammer and his outfit was ridiculous and it was a blatant Leno-copy-cat routine and we don't know how many actually wanted to take him up on it but were turned down.

But I think his thesis is correct. No one in my extended family has even started thinking about gold, and most are as oblivious to the looming dollar crash as the people he interviewed.

Face it, anybody who voted for these idiots in charge has to be oblivious to the end result of their fantasy socialist dogma. Just look at SS and Medicare and now Cap-n-trade and Obamacare. This lack of understanding of even the most basic economic and libertarian principles is IMO the greatest failing of US educational system.

I would not be surprised to find out that people simply thought there has to be some kind of scam involved, since these folks all have investments, and they sure as hell know today's DOW, NASDAQ and GOLD figures. I highly doubt that a somewhat significant percentage of these people would not be able to tell the exact number for gold that day.

On the other hand, these people are dinosaurs. They are highly fit for the current monetary climate. You can talk to them whole evening long and while they will agree with you that gold makes perfect sense, they would still buy some more DOW tomorrow.

They are intimidated by economic science and the fed so much, that they actually trust that fed is all powerful. I feel sorry for the most of them, despite their properties and titles. There is a weakness hidden underneath of all their shine, and it is ready to be exposed.

They fit this weather so good, that if the economic weather changes, they will not be able to change. They will go first.Rats, on the other hand, will survive.

Anon 10:42 YES!!!!!!So many great quotes in there I can't pick them all out.

Costata - I like what you are on to with buying up "stuff" cheap. That is exactly what the PTB did after the big margin call of 1929. It was PLANNED. There are many books on the subject. The senior Kennedy made out very well doing that.

Anon 11:17 - Ok when you say it that way, the "con" resets.

Anon 11:55 - "Where am I coming from? Austrian approach. Do I own gold? You bet.Am I saying gold is not the way? No! It is the only vehicle of escape. But it is not, the vehicle of the solution." This is THE best thing I have read in a LONG time. WOW. Thank You. I think that is what FOFOA is saying. He is the fireman getting us out of the burning building he is NOT worried about what is outside as long as it is NOT burning.

Anon 12:16 - I don't think they are gonna have a tough time. They MAY have a tough time doing what they are doing now, but I argue that is not the next phase of their plan. I feel comfortable saying they are moving from a mainly "stealing" operation to implementing a political control situation. This reset, especially in the USA, helps global gov't ring. (I like the Liberty Bell better myself).

Desperado - "Meanwhile, the 1-5% with some kind of gold will be hoarding it and using any other medium of exchange first as stated by Gresham's law." I take this to mean you are in agreement when FOFOA says gold will "go into hiding" and not trade for any currency for awhile?

I don't see how the economy could make the jump to freegold in these circumstances.

@ martijn; frankly, if I were you I would buy the "full monte" that celente is pushing "right away." Readers of this blog (should) know exactly what is happening. TPTB are highly sophisticated and know that laws of finance, like those of newtonian physics, are inviolable. All actions have consequences which have been fully understood for centuries, and certainly since offshoring/globalisation was first implemented decades ago.

Re-read Galbraith "the great crash 1929" and "a short history of financial euphoria" to remind yourself that the present catastrophe has been engineered before, time and time again. This time, it will play out on a far grander but terrible scale. Those in power now were those who repealed glass-steagal. SO QED! No surprise. Accidental? Mistaken? Unseen consequences? Come off it.

Dont hold your breath for a hybrid set of pecora hearings on a nuremberg scale chaired by the impressive and honest William Black. It aint going to happen... not this time around!!!

Not a SINGLE substantial or meaningful/logical attempt is underway to mitigate this crisis. On the contrary, ALL current political stratagems openly serve to worsen the crisis.

It always amuses me how some commentators/bloggers disparage our "financial architects" like greenspan, bernanke, geithner, summers etc (together with their political lackeys) as "stupid, mistaken, out of their depth etc" As the great Jim Sinclair said in his last (typically EXCELLENT) King interview... "If you think these guys are fools, then you are THE fool."

Read actions not words and you will come to my conclusion that the ends are being actively and consciously sought. They will be disastrous for the citizens of a once great Republic. This is a re-making of a country. It IS BEING broken before being re-cast in a crucible.

Ipso facto, I believe Celente's vision is not exaggerated. If anything, it may turn out to be mild. The blow back on dissent will be savage and swift. The relentless impoverisation of the US with comming $$$ currency crises, hyperinflation etc WILL lead to NYC becoming a Mexico City and all that Celente predicts. It is too late in the day to have any doubt about it! So get used to it.

In yesterday's posts about Jim Sinclair and others' essays and opinions on gold's future monetization, or more accurately, revaluation and resurgant use, I left out this: Jim Sinclair also used the phrase "gold cover clause".If you wish to search his site for this information, there are many references.

@Anonymous (November 10, 2009 11:38 AM): I've been wondering about that too, what if the current crisis is not an accident but a planned event? Many of us think the guys in charge are idiots, but what if it was always their intention to make things worse?

Was reading through your comments and thoght this is a really important concept:

"You are still thinking within the $-system box. Think outside of the box. Your CORE WEALTH is NOT meant to be risked. The average person, meaning 99% of the savers should not, and will not be risking their core wealth. In the future those "venture capitalists" that do risk their core wealth will be much more diligent with regard to risk, and they will be looking for much higher yields than we have seen in decades."

This goes to the heart of the problem. The entire premise of the fed has been to ratchet up velocity over the past few decades. They have done so to ensure that the financial economy outpaced the real economy and its debt locamotive.

But the perverse implciation of raising yields and returns (risk) is that the velocity of money has to slow anfd with it economic growth. The implications of suchg are draconian - permanently hgiher unemployment and structurally slower growth rates. This is exactly what the Fed is purporting to be fighting against. In essence they are pushing back against the PIMCO new normal or as many have been sayiong for years the old euorpe model - which in and of itself isn't really that bad. What if that is simply as good as it gets in the current paradigm?

Freegold or anything gold is inhernetly restrictive overtly or subtly which is why the CBs will work agressivily to map an alternative course (just as the bank reform bill offers shiny headlines and 11 pages of undoing). Gold will be tolerated up until the point it imposes some sort of harness on the government's ability to act, assuming of course latent political response.

It would be an interesting analysis to think about the possible alternatives to Freegold that innure to the governement as that is a more probably outcome - asset backed (staples, housing, etc.) currency, SDRs, Local printing, etc. The problem with almost every alternative is that it represents a devolution of the federal power and more importantly the embedded subsidy to the US globally - warranted or not for the security umbrella provided.

No argument that a new benchmark is coming, the question is what will the USD/petro axis (US, UK, Saudi, Japan) do to forestall the transition. Seems like Japan is already hedging its move with relations per China. Saudi will be purchasing power agnostic - especially if Iran goes nuke. US and UK play the MAD game above all hoping for workout and or time.

I do agree that gold will go into hiding, I just doubt that the "awhile" will merely be until the awakening of freegold. I think it will stay in hiding until seized or until some stable currency arrives on the scene.

Anonymous @11:38 AM talks about a conspiracy to crash the system in order to buy assets at ridiculously low prices. The Rothschilds were famous for this, and Goldman Sachs seems to have been making $100M/day doing this lately. But I find some conspiracy to destroy the dollar, crash the markets, start an insurrection, and then start a dictatorship and pick up the pieces as implausible as all the 9/11 conspiracies. As usual I ask for some evidence of who exactly would be hoping to pull this off?

Anonymous says: Not a SINGLE substantial or meaningful/logical attempt is underway to mitigate this crisis. On the contrary, ALL current political stratagems openly serve to worsen the crisis.

Do you really think that all the coordinated Keynsian actions of the world CB's are a actually a conspiracy of Rothschilds or other Jewish bankers? I am highly sceptical, although Pelosi, Dodd, Frank, Rangel et al are almost plausible as the buffoon fall guys.

Anon 12:16 - VERY PLANNED.I have readEN ROUTE to Global Occupation - KahBehold a Pale Horse - CooperThe Shadows of Power - Perloff (awesome)What this blog is to gold and economics these books are to the politics. I thought they were very good.

steve B; you ask WHY?????????????? Surely you jest? Bravo, great sense of humor. does anything ever transpire from any human transactions without some degree of "conspiracy?" (a word not a sentence - sotto voce please). No, I didnt think so.

Could the answer you seek be $$$$$$$$$$$$$$$$$$$$$$$$$$$... funny why folks always claim to ignore the obvious.

Steve B, please do retain your "high" degree of scepticism, it will carry you far. funny, you remind me of karl denninger with his forthright simplistic outrage but innocent denial of today's "new paradigm" parameters.

You may be right after all. what do I know? I just have a more cynical take than the "why would they break our apple pie" brigade do. De Nile is a human self-protective mechanism after all, especially in the face of appalling danger.

dont get me wrong, I try to survey the scene with cold, unemotional reptilian eyes. I have nothing against GS and the big big boys. they are gaming the system just like lesser predators do and would. I have a sneaking admiration of how well this is being pulled off. second (biological) fronts opening up etc I hate and therefore do not deserve any charge of hypocrisy. "regulatory capture" etc is working only too well.

gotta admit, it is an incredicle sight to behold. kudos to the boyz... no, I really do mean it! the coming sheissesturm has been clearly visible from 2000 or so. even before for a few alert souls.

population control... I'm all for it. look around you at the lotos eaters jabbering inanely on their cell phones, texting back and forth... to what avail? To sacrifice themselves on the alter of consumerism. No it really is time for those in the west to remember what SURVIVAL REALLY means.

if americans (and others) are so dumb as to not understand the obvious, they really do deserve what they are shortly to receive. and sadly, many/most "educated" americans fall into this category.

FOFOA; great site and thanks in advance for a "satirical" though politically pertinent departure from the discussion of freegold.

Do you really think that all the coordinated Keynsian actions of the world CB's are a actually a conspiracy of Rothschilds or other Jewish bankers? Desperado, Yes.I don't think there is ANY doubt about it. Please read the Perloff book. Report back to the group :)

I feel like today the inmates are running the place here and FOFOA will tell us why all these doubts about freegold shouldn't be doubts.

Anon 2:17I think FOA would agree with your sense that the boyz are playing with a full deck, if stacked, he wrote often about them as being the best and the brightest, merely doing the bidding of society. His perspective always seemed to hinge on the inevitable as opposed to the conspiratorial. Somebody just gets to go along for the ride i.e. GS, JPM et.al.

What you are talking about is deflation of the healthy kind. If everyone is not employing their savings into creating malinvestment on a global scale (which is the very mission of the $-IFMS), then yes, the economy must contract in order to find the correct investments. But as it does, prices will fall, labor prices will also fall, until a new equilibrium is reached which contains much less malinvestment. (Remember, these prices fall against gold, not against the unlimited universe of the $)

It is impossible to keep an economy (employment) based on this level of malinvestment going, even in a totalitarian dictatorship that prints to keep itself running. Mugabe is a perfect example on a tiny scale. The allocation of resources needs to be reset and recapitalized, one way or another. The inevitable gold revaluation will begin this process without dictate or legislation. Those with some gold will be on the preferable side of this reallocation.

I posted this before. It is an amazing analysis of how the $ financial industry has literally sucked the life-blood out of the real GDP growth rate that had been relatively steady for a century...

Yes, of course every country needs a basic financial systemto function effectively with letters of credit, deposits, andcheck writing facilities, etc. But as you move beyondthat it is worth remembering that every valued job createdby financial complexity is paid for by the rest of the realeconomy, and talent is displaced from real production, assymbolized by all of the nuclear physicists on prop tradingdesks. Viewed from the perspective of the long-termwell-being of the whole economy, the drastic expansionof the U.S. financial system as a percentage of total GDPin the last 20 years has been a drain on the health and coststructure of the balance of the real economy. To illustratethis point, in 1965 the financial sector of the economytook up 3% of the GDP pie. The 1960s were probably thehigh water mark (or one of them) of America’s capitalism.They clearly had adequate financial tools. Innovationcould obviously have occurred continuously in all aspectsof finance, without necessarily moving its share of theeconomy materially over 3%. Yet by 2007 the share hadrisen to 7.5% of GDP!...

...The financial world was reaching into the GDP pie andtaking an unnecessary extra 4%. Every year! This extrarent is enough to lower the savings and investment potentialof the rest of the economy. And it shows. As mentionedearlier, the growth rate of the GDP had been 3.5% a yearfor a hundred years. It had proven to be remarkablyrobust. Even the Great Depression bounced off it, andsoon GDP growth was back on the original trend as ifthe Depression had never occurred. But after 1965, thegrowth of the non-financial slice, formerly 3.4%, slowedto 3.2%. After 1982 it dropped to 3.1% and after 2000fell to well under 3%, all measured to the end of 2007,before the recent troubles. These are big declines. It is asif a runner has a growing and already heavy blood suckeron him that is, not surprisingly, slowing him down. Inthe short term, I realize that job creation in the financialindustry looked like a growth driver, as did the surge infinancial profits (which we now realize were ludicrouslyoverstated). But in the long term, like a sugar high, thisstimulus was temporary and unhealthy.

The financial system was growing because it could. Themore complex and confusing new financial instrumentsbecame the more “help” ordinary citizens needed fromthe experts. The agents’ interests were totally unalignedwith the principle/clients’ interests. This makes amockery of “rational expectations” and the EfficientMarket Hypothesis, which assumes (totally unproven, asusual) equivalent and perfect knowledge on both sides ofall transactions. At the extreme, this great advantage inknowledge and information held by the financial agentshas the agents receiving all the rewards, according to therecent work by my former partner, Paul Woolley, and hiscolleagues at the Woolley Centre for the Study of CapitalMarket Dysfunctionality. (With a great name like thattheir job is half done before they start.)

thanks dragonfly, i like your thoughtfully flitting and elliptical style.

er, "doing the bidding" of whose/which society? bright/best... agreed. evolutionary selection pressures to better their survival and replication odds. they are no dummies. they know what they are doing. AND EVERYTHING IS GOING EXACTLY ACCORDING TO THE PLAN>.

isnt the inevitable the same as conspiratorial? I am always surprised/troubled by the over-usage of the word "conspiratorial" usually by americans who have been programmed to wave it towards any concept that makes them ever so slightly uncomfortable.

anything that challenges their "apple pie-fairs fair innocent/naive" view of the (very, and increasingly DARK) world. to my viewpoint EVERYTHING IS ALWAYS conspiratorial. goes without saying so why say it?

could we instead use the formulation "respiratorial" since most people (including conspirators) respire? and perspire for that matter... and many will sadly expire in months and years to come!

i thought GS etc were the boyz? it IS their ride. kudos to them. parasites (especially hugely greedy and successful ones) have feelings too and their own evolutionary niche. so I cant criticize them for their existence.

looking at it from a darwinian perspective, can you really blame a squid for "jamming its blood funnel into anything that smells of money?" that is what it is on the earth/under the ocean to do.

squids and other cephalopods are NOT parasites (so what if they were). They are beautiful, highly intelligent, and mobile members of the mollusc family. You see... we all have some purpose in the frantic, chaotic scheme, of competition and replication.

FOFOA, how do you like the fame? Your message certainly deserves to be noticed but I know you will find a way to avoid watering down the essence in the comments section...

To most of the anonymussues above:

Ask yourself this question: am I a libertarian because I feel I deserve more than what I am currently getting (money, attention etc.) or are my views libertarian because my capital (and me) will be better protected from the collective in a free society&markets so I will be able to deploy it more efficiently?

If you find yourself in the first group (where I currently rate myself), would you please shut up and simply observe&grow?

I wonder if it can be said that those countries helping their citizens to acquire gold before the reset are planning for a relative freedom, while those that keep their citizens unaware are either planning or will be forced to build a relatively compulsory order?

FOFOA - congrats on a bunch of finely written essays. I'll bet if Another and FOA are lurking they have big smiles on their faces. You communicate the Freegold message in a very clear style. I've enjoyed every minute of catching up in the archives and look forward to your ongoing analysis as the trail widens.

Simple, and they have said it OVER and OVER again, on the record. ONE world government with ONE world currency.

For every big fish in the global elite that would likely come out with more power with the ascent of ONE world government and currency, there are dozens of big fishes in a national economy that would be devoured.

If you had real power and wealth beyond your dreams in the US, EU or BRIC's, would you really want to risk it all in another roll of the dice through dollar collapse, chaos and one world government? That is like war, only a few really desperate power-mad ever really wish that because once put in motion the end outcome is highly unpredictable.

I am not saying that there are no parties that want ONE world government, I am just saying that most of the worlds elite must realize what kinds of risks this change would entail for themselves.

I would love to read The Shadows of Power, but shipping and customs into Switzerland end up tripling the Amazon price...

FOFOA, for last 1,5 year I am discovering this interesting world of monetary politics (deeper than before as I studied economics and realized things work differently than I was told) I am realizing how interconnected it is with other aspects of our life.

I see also that you are not stagnant, your thoughts develop, change, form, and you search now for one, you are NOW interested in something you can not formulate properly - HOW things will envolve (along the WHERE TO). You have the feeling of world tendency - inevitable gravity toward freegold but you still lack some parts to verify your end result - freegold, or some of its form.

Let me present you one book you will find highly valuable, unless you know it already.

Stefan Levy: "Artificial Life: The Quest for a New Creation". Please check it out, it will give you a great deal of intelectual "food" for your research. You will be surprised how much of it. :o)

Please do not hesitate and check it out. I found it about 1 year ago and still I am returning to it once a time when needed. I believe it will help you to understand forming of the processes, changes in transtions from one stage of the system into some other one.

My approach is Austrian. It tells me that there are no miracles. They more TPTB eat away, the less is left for everyone else.

This is a zero sum game, because they steal the ever increasing percentage of goods produced, not the given quantity. It does not matter how productive we are, they take 20, 30, 40,...80,90% of everything we make. Pretty soon, we are in a coma.

This is what pushes them to go global. Their business is unsustainable (oh GOD how I hate this word lately, but for other reasons).

So, the solution is always to push to the tipping point (meaning to take as much as physically possible), and then to reset.

So, it is not as if they had other opportunities to increase their take. It is not as if they could just keep the status quo either. They procreate, their desires escalate. The same thing is happening to their simbiotic partner, - the welfare recipient class. Progressively (logarithmically) more is needed.

Also:The ECB is just not into selling any gold. They bought .9 tonnes of gold just to make coins.

Central Fund of Canada purchasing 230 million dollars worth of physical gold and silver. This is very bullish for gold and silver as these guys take the bullion off the market. The bankers are very upset every time Central Fund does one of these purchases.

Mortymer to FOFOA:1/ (This different thought is not related to the previous one about some study you should do)This is most likely not true but imagine, lets just dream a bit.How would you dismantle the dollar reserve system most easy way so we will not have the crash hard landing?Ask yourself how would you secure, stop the system from going down too fast? How to set it to path for a natural change?Could gold prices be just manipulated such way that they grow steadily?Meaning: could they be manipulated not to shoot up to high? Could there be some limit how much you can withdrow from the system so it will not crash?

2/ Like in any casinos there is a limit for your bet. If you want to play on different level you need to go to play with different professionals where rules are set bit differently and your token is secured in case you loose... You wrote once that you would have a pile of nickles if you collected each time you thought the dollar is kaput. I have 3 of them now. Before any BIG visible phase transition is the huge amount of the growth in the entrophy. You are just part of that. In order to see where we are you must evaluate how far we got to the stage which is ready for transition, then it will be natural and smooth. (Well, the dead branches will drop but that is part of it) = could prices of gold be manipulated to just slow growth e.g. max 50% annually, 4% monthly or somthing like that? So, please elaborate on this if you can please.

3/ I think that BIS could turn the table at any point they wish but they do not want to, there will be no players at the table anymore and the the MadMax perhaps, so they play the game and other participants agree with it so they play along. The IMF/dollar fraction thinks they are bigger players. Somebody said that Amigos play Poker, Russians Rulette and Chinese Go. Do yo know about their 50 year plan? How much do you think about their wish to be The BANK? I am just wandering if they may have capability of creating copy of Dollar/Euro reserve system and pushing that forward. Do they really play along the BIS? BIS opened the branch in HK some years ago which confirms FOA/Another 2 fraction world. But like before the communist block had certain freedom and differed a bit, the Chinese play for their goals in the first place.So how do you see this aspect?

4/ IMHO I believe if there is some manipulation for where we are going, they may set borders but not the full path, those borders could be baypassed as any human law this world so yes, there is a natural gravity, just the direction is set roughly. True/False?Thank you for sharing your ideas with us.

Would it be cheaper if I shipped it to you? The book will tell you why the elite make war and how it is NOT risky for THEM.

Sure lots of "not them" big fishes better read this blog since you are right, they are gonna get whacked.

They say they make the problems and then they are the ones who step up with the solutions.

With the way the US population is sheep, they are gonna get sheered. They are able to plan and execute in this environment. Like someone posted, EVERYTHING that is happening is happening to make this worse not better.

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